Investor Education
Is a Fiduciary Better Than a Broker?
For most executives and business owners navigating complex financial decisions, yes — and the reason comes down to a single legal obligation. A fiduciary is required by law to act in your best interest at all times. A broker is not. Understanding that distinction before you hire anyone may be one of the most consequential decisions you make.
No cost. No obligation. Strategy first.
The Short Answer
What "Fiduciary" Actually Means and Why It Changes Everything
A fiduciary financial advisor is a professional legally required to act in your best interest on a continuous basis, not just at the moment of a single transaction. This obligation originates from the Investment Advisers Act of 1940 and applies to Registered Investment Advisers (RIAs) registered with the SEC or a state securities regulator. A broker, by contrast, is held to the SEC's Regulation Best Interest (Reg BI) standard, which requires that a recommendation be in the client's best interest at the point of the transaction, but does not impose the same ongoing, relationship-wide legal duty that applies under the fiduciary standard.
The practical consequence: when a broker recommends a product, they must show it is not unsuitable for you. When a fiduciary recommends a course of action, they must be prepared to demonstrate it is the best available option given your full financial picture. That is a fundamentally different legal threshold, and it shapes everything from the advice you receive to how conflicts of interest are handled.
It is worth noting that a fiduciary standard does not eliminate all conflicts of interest. Conflicts may still exist. The standard requires that they be disclosed and managed, not that they be absent. That distinction matters, and any advisor worth working with will explain it plainly.
Side by Side
Fiduciary Standard vs. Suitability Standard: A Direct Comparison
The legal standards governing fiduciary advisors and brokers are different in scope, duration, and consequence. This table reflects the general framework under current federal law. Actual practices and compensation structures vary by firm and individual advisor.
| Factor | Fiduciary Advisor (RIA) | Broker (Broker-Dealer Rep) |
|---|---|---|
| Legal Standard | Fiduciary duty — must act in client's best interest continuously | Regulation Best Interest (Reg BI) — at point of recommendation |
| Governing Law | Investment Advisers Act of 1940; SEC or state regulation | Securities Exchange Act of 1934; FINRA oversight |
| Duty Duration | Ongoing — applies to the full advisory relationship | Primarily transactional — at or near the time of a recommendation |
| Conflict of Interest Disclosure | Full written disclosure required, typically via Form ADV (publicly available) | Required to disclose material conflicts; format and depth vary |
| Compensation Transparency | Fee structures disclosed in advance; must not override best-interest duty | Commission-based or fee-based; structure may influence recommendations |
| Registration | Registered Investment Adviser (RIA); typically Series 65 or 66 | FINRA-registered broker-dealer representative; typically Series 7 |
| Public Disclosure Document | Form ADV — available via SEC IAPD | Form CRS — summarizes services and conflicts; BrokerCheck via FINRA |
| Planning Scope | Typically comprehensive, ongoing financial strategy and advice | May focus primarily on transactions; planning depth varies by firm |
Sources: Investment Advisers Act of 1940; SEC Regulation Best Interest (2019); FINRA BrokerCheck. Table reflects general federal regulatory framework as of 2026. Individual firm practices vary.
Why It Matters in Practice
When the Standard Actually Makes a Difference
If you are an executive or business owner, you have likely been approached by financial professionals who lead with a product rather than a plan. That experience is not accidental. It reflects the business model of broker-dealer distribution. Understanding where the standard applies, and where it does not, helps you evaluate what you are actually being offered.
The fiduciary standard matters most in three situations: when your financial picture is complex, when decisions interact across multiple areas (taxes, retirement income, business exit), and when the stakes of getting it wrong are highest. In those contexts, having an advisor who is legally accountable to your interests on an ongoing basis is a meaningfully different arrangement than working with someone accountable only at the moment of a sale.
Scenarios Where the Standard Has Direct Consequences
Retirement Income Planning
When structuring retirement income planning across multiple sources (401(k), IRA, pension, Social Security), a fiduciary advisor is required to evaluate the strategy against your overall tax situation and goals, not just recommend a product that generates a sale.
Business Exit and Liquidity Events
A business sale involves tax planning strategies, investment decisions, and income planning decisions that interact directly. An advisor with a fiduciary obligation must account for the full picture, not recommend the product with the highest commission attached to the proceeds.
Rollover Decisions
When you leave a job or transition out of a company, decisions about rolling over a 401(k) carry significant tax and long-term consequences. The SEC has specifically identified rollovers as an area where the fiduciary standard provides meaningful additional protection.
Due Diligence
Five Questions to Ask Before Hiring Any Financial Professional
The term "financial advisor" is not a regulated title. Anyone can use it, regardless of their legal standard, registration type, or compensation structure. These questions cut through the ambiguity and reveal exactly what you are working with before you commit.
A professional with nothing to hide will answer these questions directly and in writing. Vague or defensive answers to any of them are worth paying attention to.
"Are you a fiduciary, and does that apply to our entire relationship or only at the time of recommendations?"
This distinguishes between a true ongoing fiduciary obligation and Reg BI, which applies at the point of a transaction.
"How are you compensated — and are there any scenarios where you receive more money if I choose a specific product?"
This surfaces commission structures, revenue-sharing arrangements, and other incentives that may influence recommendations.
"Can I see your Form ADV or Form CRS?"
Form ADV is the RIA disclosure document available through the SEC's IAPD database. If an advisor cannot produce it, they are not operating as an RIA. Form CRS applies to broker-dealers and summarizes services and conflicts.
"What is your process before making any recommendation?"
A strategy-first advisor builds a comprehensive picture before recommending anything. If the process begins with a product, that tells you what is driving the conversation.
"What happens if a recommendation you make turns out not to have been in my best interest?"
This tests whether the advisor understands and accepts the legal weight of the fiduciary obligation — and whether they can explain the recourse available to you.
Our Standard
How New Horizons Boutique Financial Services Operates
At New Horizons Boutique Financial Services, our team holds FINRA Series 65 and Series 66 registrations, MBA credentials, and economics training specifically because we believe every client deserves a relationship built on full transparency about how advice is structured and why. We operate as a Registered Investment Adviser (RIA) and apply a fiduciary standard to our advisory relationships.
We also believe education comes first. Our approach is to explain every strategy, every trade-off, and every conflict clearly before making any recommendation. That means no product-first conversations and no templates. Every plan is built around your specific goals, timeline, and situation. You work directly with your advisor throughout, not through layers of support staff.
Strategy Before Products
Every engagement begins with understanding your full financial picture. No product is discussed until a strategy is in place.
Education and Transparency
Clients are kept fully informed about the reasoning behind every recommendation, including how conflicts of interest are disclosed and managed.
Boutique by Design
We intentionally limit the number of client relationships we maintain so every client receives focused, continuous attention, not a sales pitch.
Fee Transparency
What We Charge: No Surprises
We believe you should know exactly what you pay and what you receive before you commit to anything. As a fee-only financial advisor operating under a fiduciary standard, our fee structure is straightforward and disclosed in full at the start of every engagement.
Advisory Fee
$150 – $300 /month
Covers ongoing financial planning, strategy development, and advisor access. Actual fee depends on the complexity and scope of your situation.
Asset Management Fee
0.50% /year
Applied to assets we manage on your behalf, assessed before internal portfolio costs. Not all clients require asset management services.
Fees vary based on individual circumstances and are disclosed in full before any engagement begins. These figures represent typical ranges and are not a guarantee of cost for any specific client.
Common Questions
Frequently Asked Questions
Which is better: a fiduciary or a financial advisor?
These are not mutually exclusive categories. A fiduciary can also be a financial advisor. The term "fiduciary" describes the legal standard an advisor operates under, not their title or service type. The more accurate comparison is between an advisor who operates under a fiduciary standard (such as an RIA) and one who operates under the suitability or Reg BI standard (such as a broker). For complex, ongoing financial planning, a fiduciary relationship is generally considered a stronger framework because the legal obligation to act in your best interest applies continuously, not only at the point of a transaction.
What is the downside of using a fiduciary financial advisor?
The most commonly cited considerations when working with a fiduciary RIA include: fee structures that may differ from commission-based models (fiduciaries typically charge advisory fees rather than transaction commissions), potential minimum account thresholds at some firms, and limited access to certain proprietary products that are only distributed through broker-dealer channels. Additionally, being a fiduciary does not eliminate all conflicts of interest. It requires that conflicts be disclosed and managed. A fiduciary advisor who does not explain their conflicts clearly is not meeting the spirit of the standard. Evaluating those disclosures carefully remains the client's responsibility.
Is Charles Schwab considered a fiduciary?
Charles Schwab operates as both a broker-dealer and, through its registered investment adviser subsidiaries, as a fiduciary for certain advisory services. Whether the fiduciary standard applies to a specific relationship with Schwab depends on the type of account and service you use. Schwab's brokerage accounts are subject to Reg BI, not the ongoing fiduciary standard. Certain managed account programs offered through Schwab's RIA subsidiaries may carry a fiduciary obligation. The key is to ask which legal standard applies to your specific account and service, then review the relevant Form ADV or Form CRS for that entity. The same logic applies when evaluating any large financial institution: the entity's registration type and the specific account type determine the standard, not the firm's name or reputation.
What is the average fee for a fiduciary financial advisor?
Fiduciary financial advisors who operate as RIAs typically charge in one of several ways: a percentage of assets under management (commonly ranging from approximately 0.5% to 1.5% annually, depending on account size and services), a flat annual retainer or monthly subscription fee, or an hourly fee for specific engagements. Fees vary significantly by advisor, firm size, and the scope of services provided.
At New Horizons Boutique Financial Services, our fee structure is straightforward. We charge a subscription advisory fee typically ranging from approximately $150 to $300 per month, which covers ongoing planning, strategy, and advisor access. For clients who retain us to manage assets on their behalf, we charge an asset management fee of approximately 0.50% annually, assessed before internal portfolio costs. Actual fees depend on the complexity and scope of your engagement and are disclosed in full before any work begins. You can learn more on our fee-only financial advisor near Woodbury page. When evaluating any advisor's fees, compare the total cost of the relationship against the services included: tax planning, retirement income strategy, estate coordination, and ongoing reviews, not just the investment management component.
Can a broker also be a fiduciary?
Yes, in some cases. Many financial professionals hold both broker-dealer registration (Series 7, regulated by FINRA) and investment adviser registration (Series 65 or 66, regulated by the SEC or a state securities regulator). When operating in an advisory capacity under the RIA registration, the fiduciary standard applies. When operating in a brokerage capacity — executing transactions under a broker-dealer license — the Reg BI standard applies instead. This dual-registration model is legal and common, but it means the applicable standard can shift depending on the service being provided. If you work with a dually-registered professional, it is important to clarify in writing which standard applies to each aspect of your relationship.
How do I verify whether a financial advisor is actually a fiduciary?
The most direct method is to look up the advisor's registration through the SEC's Investment Adviser Public Disclosure database (IAPD) at adviserinfo.sec.gov or through FINRA BrokerCheck at brokercheck.finra.org. If an advisor is registered as an RIA, or an investment adviser representative of an RIA, the fiduciary standard applies to their advisory services. Review their Form ADV Part 2, which describes services, fees, and conflicts of interest in plain language. If you are looking for a fiduciary financial advisor in Minnesota, you can verify registration directly through those databases before your first conversation. A fiduciary has no reason to be evasive about this question.
Keep Learning
Related Resources
Understanding the fiduciary standard is one part of building a sound financial strategy. These resources address related questions that frequently arise for executives and business owners navigating the same decisions.
Fiduciary Advisor vs. Broker: Key Differences
A deeper look at the two models, when each may make sense, and what investors should know before choosing a financial professional.
What Is a Fiduciary Financial Advisor?
A plain-language explanation of the fiduciary standard, how to verify an advisor's registration status, and what it looks like in a Minnesota planning context.
Retirement Planning in Minnesota
What professionals and executives in the Twin Cities metro need to know about Minnesota's tax rules, retirement income, and planning timeline.
Work with a Fiduciary
Ready to Have a Conversation That Starts with Strategy?
If you are an executive or business owner who has fielded product pitches without a clear picture of the advisor's legal obligation to you, a first conversation with New Horizons Boutique Financial Services costs nothing and carries no obligation. We start with your situation, not a product.
8647 Eagle Point Blvd. Suite #1, Lake Elmo, MN 55042